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No One Is Delisting Sirius XM

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One of the takeaways from yesterday's conference call is that Sirius XM Radio (Nasdaq: SIRI  ) has no intention of letting Nasdaq OMX Group (Nasdaq: NDAQ  ) show it the door.

CEO Mel Karmazin hopes that it doesn't get to that. The stock needs to close above the $1 mark for a few more days to get off of the exchange's watch list. If it should happen to buckle -- or fall out of compliance in the future -- Karmazin has a reverse split in his pocket. He can also appeal the move, buying the satellite-radio operator a little time.

Karmazin pointed out yesterday that he won't entertain the reverse if Sirius XM is in compliance, but it's hard to win institutional ownership with a $1 share price. Given the company's present enterprise value of roughly $10 billion -- after considering Liberty Capital's (Nasdaq: LCAPA  ) 40% stake and the company's debt -- it will have to be valued as a $19 billion company to justify a price of $2. There are certainly plenty of potential catalysts in the coming years that may make that feasible, but the current growth rate and low margins make it more likely that investors will be trading in the vicinity of a buck for some time.

Reverse splits aren't fatal. Companies including priceline.com (Nasdaq: PCLN  ) and AIG (NYSE: AIG  ) have overcome the humbling procedure. Still, there are many shareholders who are hesitant to support the reverse, fearing that it will attract more short interest than institutional ownership.

I have no beef with a reverse split as a way to grant the stock a more marketable price, but I don't think it's going to be necessary even if Sirius XM fails to close above the $1 mark through early next week.

Why? I dare Nasdaq OMX to delist Sirius XM! Would the exchange really boot a stock that is routinely atop its most actives list? Could Nasdaq afford to alienate so many retail investors, validating pink sheets in the process?

The market may gasp if Sirius XM closes below the $1 mark between now and Tuesday, but Sirius XM doesn't need to flinch. If push comes to shove, I would be shocked if Nasdaq didn't revisit its listing requirements to consider a stock's actual market cap or enterprise value before being kicked off the exchange.

Now isn't the right time for any exchange to dismiss volume.

What would it to take for Sirius XM to be valued at $2? Share your thoughts in the comment box below.

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Nasdaq OMX Group is a Motley Fool Inside Value recommendation. priceline.com is a Motley Fool Stock Advisor pick. Motley Fool Options has recommended a write covered calls position on Nasdaq OMX Group. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz is a subscriber to both Sirius and XM. He does not own shares in any of the stocks in this article. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.


Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 26, 2010, at 2:05 PM, mikecart1 wrote:

    1st. And who cares about delisting. It will just be the worst company on the stock exchange rather than being a decent company not on the stock exchange.

  • Report this Comment On February 26, 2010, at 2:08 PM, PeteC888 wrote:

    If the "free" internet radio stations continue playing more and more comercials to pay for the music they play, I bet it won't be long before enough people pay for Sirius to make it worth $2 per share.

  • Report this Comment On February 26, 2010, at 2:20 PM, WoodyDog1400 wrote:

    Mikecart1, stick with your SPAM in the google forums instead. When will you realize no one is listening to you?

    Rick - good artice and agreed.

  • Report this Comment On February 26, 2010, at 2:21 PM, PeteC888 wrote:

    Some day when we can get internet almost everywhere that we drive, and most of us are willing to pay for internet connectivity on our phones, it will actually be GOOD for SIRIUS XM investors. Sirius XM can stop paying for satellites and just offer their content over the internet for a whole lot less money per subscription because they don't have to pay for satellites. Then, almost everyone will pay for Sirius XM just like almost everyone still pays for an am/fm radio in their cars even though they still buy CDs and iPods. Even though there will be a little competition from "free internet radio stations" those stations will not be able to afford the talent that Sirius XM already has already built up and will hopefully continue building up to stay better than other internet options. Most "free internet radio sights" will also play annoying commercials or be forced to charge too much to cover the royalty fees that Sirius XM is already paying. I have tried, some of those "free radio sights” and they are playing more and more commercials. I like the iPods, but sometimes I don't want to listen to what I already have stored and I don't want to download new music. I just want to turn on Sirius XM and let their professional DJs play great commercial free selections for me without me having to do anything else except change the station every once in a while. If Sirius XM plays the same songs too much on one station, there are still plenty of other stations to choose from out of about 150 stations. My message to Sirius XM is: Plan to be the leader of internet radio so you will be the leader in internet radio. I think the internet is where we are headed, and I think that is an opportunity for Sirius XM.

  • Report this Comment On February 26, 2010, at 2:28 PM, king4life wrote:

    It's a long way to $2, lets try $1.35 then $1.50 first.

    Nasdaq compliance and brokers allowing margin next week.

    Refinance 2013 debt with 03/19/2010 callback

    Buying back other debt with free cash flow.

    Stern deal

    Beating earnings estimates for Q2 then Q3

  • Report this Comment On February 26, 2010, at 5:45 PM, Zliz217 wrote:

    What would it to take for Sirius XM to be valued at $2?

    I'm expecting to see prices get to about $1.40, $1.50 this year. Based on past performance and recent dealings. To get to the $2. mark, the company will need to keep doing a great job at retaining its automotive users/customers while expanding availability to the developing internet market.

    The troubled economy is a tough sell for a luxury like this...but I can not live without my commercial free radio on my long commute! One day soon we may all have internet signal in our cars and see that as being the future of 'radio' as we know it.

  • Report this Comment On February 26, 2010, at 6:23 PM, langco1 wrote:

    sirius should have been delisted a year ago and has been given special treatment.sirius is still surving off of a large investors cash infushions and will be in bankruptcy as soon as he runs out of money or patientce...

  • Report this Comment On February 26, 2010, at 7:23 PM, xmlikerinvest wrote:

    Many people perceive that there is manipulation of this stock. The idea is that Karmazin and Goldman Sachs have decided to let it get above $1 just in time for March 15. Then they may keep it low til June until they can institute the poison pill to prevent a buyout. I suppose after that there is no reason to hold it down. My guess.

    http://www.gokandy.com/Blog/Blog.aspx?Id=141

  • Report this Comment On February 26, 2010, at 7:23 PM, xmlikerinvest wrote:

    Many people perceive that there is manipulation of this stock. The idea is that Karmazin and Goldman Sachs have decided to let it get above $1 just in time for March 15. Then they may keep it low til June until they can institute the poison pill to prevent a buyout. I suppose after that there is no reason to hold it down. My guess.

    http://www.gokandy.com/Blog/Blog.aspx?Id=141

  • Report this Comment On February 26, 2010, at 8:24 PM, terikirby wrote:

    I love Sirius, its here to stay!!!!!!!!!!! Sirius Rocks

  • Report this Comment On February 27, 2010, at 6:29 AM, paulbverizonnet8 wrote:

    . What does SIRI need to do to stay above a buck a share? Make the insiders start buying the stock in their company.

    . When I see insiders buying SIRI, on my yahoo stock ticker graph, I will feel a whole lot better.

    Giordano Bruno.

  • Report this Comment On February 27, 2010, at 6:54 AM, jfrankh57 wrote:

    Control spending. At some point, you have to realize that running a company (or a government) on credit is a good thing in the short run (when absolutely needed) and devestating in the long run.

  • Report this Comment On February 27, 2010, at 2:35 PM, Jokers4 wrote:

    Mel - I have risked all my savings for this company because of your reputation alone. If you say we can make it to wo dollars in a year I can hold on.

    Michael Joseph Gaffey

  • Report this Comment On February 27, 2010, at 4:32 PM, langco1 wrote:

    sirius living off of cash infushions from a large investor is near bankruptcy and on the top of the list for stocks to be delisted fron the nazdaq......

  • Report this Comment On February 28, 2010, at 3:12 PM, baldheadeddork wrote:

    Am I the only one marveling at a company at $1 that still has a market cap of almost four billion dollars?

    Do SIRI stock certificates look like old Peso notes?

  • Report this Comment On February 28, 2010, at 3:12 PM, baldheadeddork wrote:

    Am I the only one marveling at a company at $1 that still has a market cap of almost four billion dollars?

    Do SIRI stock certificates look like old Peso notes?

  • Report this Comment On February 28, 2010, at 6:07 PM, langco1 wrote:

    sirius near bankruptcy has more to worry about than being delisted...

  • Report this Comment On March 01, 2010, at 6:36 AM, pappachippy1970 wrote:

    Now that sirius has become a viable company it's not what their paper value says that will command a $2 a share price tag but rather the possibility that it will become a stragegic addition to a larger companies portfollio. Whether it's Apple, Microsoft, or Google Sirius is poised and is a prize to be won. It can or will be the strategic edge for one of these companies to gain tremendous market share in digital delivery and be very similar to Apples current 80% share of music downloads. It won't be long before Sirius moves to the next level. How exciting!

  • Report this Comment On March 01, 2010, at 7:39 AM, Anthiena wrote:

    Interesting stuff. I highly doubt it's just one large investor. The sheer amount of subscribers to Sirius is something to behold. I highly doubt that they are on the edge of shutting down. Sounds like something blown completely out of proportion. Whether folks like to admit it or not, there is a team to be thanked for Sirius's success:

    Howard Stern and company.

    Yes, the show is unabashedly for the over 18 set, but you know what? It's always interesting. Even the ones who don't like Stern listen, just to hear what he says next. Now that's compelling radio.

  • Report this Comment On March 01, 2010, at 11:13 AM, langco1 wrote:

    will sirius be delisted or file for bankruptcy first?they have 2 choices left..

  • Report this Comment On March 01, 2010, at 11:33 AM, irish80ca wrote:

    I got into SIRI at around $0.43 a share so I'm happy right now but $2... I can't see it happening anytime soon. Let's push for $1.50 first.

    I purchased a 2010 Ford Escape back in the fall and it came with a 6 month subscription to Sirius. I like it but as much as I hate to say it, I don't like it enough to pay the monthly fees when my trial run expires in about 2 - 3 weeks.

    For now I'll stick to connecting my iPhone through my Microsoft Sync.

    Oh, and for a company trying to get me to continue my subscription they're not doing a great job with the follow up. I've received one mailing about 2 months ago asking me to continue my subscription.

  • Report this Comment On March 01, 2010, at 2:01 PM, baldheadeddork wrote:

    "For now I'll stick to connecting my iPhone through my Microsoft Sync."

    This is why I'm bearish on SIRI. Any car with a USB jack can be used to connect to a MP3 player that can store thousands of songs for less than $50 or a smart phone that can access free streaming radio like Pandora. I just don't see how their business model works long term.

  • Report this Comment On March 01, 2010, at 7:31 PM, Apollo2046 wrote:

    After today's big drop, should I sell or buy more at this point? Please advise....

  • Report this Comment On March 16, 2010, at 2:25 AM, Daddyshortbucks wrote:

    @baldheadeddork

    Sirius XM is more than just music. For many, it's more about the premium talk programming, such as Stern, Oprah, Martha Stewart, sports radio, etc.--things that aren't available for download from the iTunes store or streaming from Pandora.

  • Report this Comment On April 13, 2010, at 10:34 AM, kevin414 wrote:

    This is NOT a foolish comment,but actual fact! when Sirius XM brings back ALL of the XM programming that it once had, the stock values would skyrocket! I am an XM subscriber of 6 years now. Since the merger, the music variety has gone down the toilet! The XM subscribers are NOT happy and are canceling subscriptions because of this.Some one needs to tell Mel Karnazin to get his head out of his a**, and stop with the FM type of programing that is taking over Satellite Radio and destroying it!!!! If anyone reading this does not believe this can do a Google saerch on this. Someone HAS to let All Sirius XM shareholders this is EXACTLY what is hurting the stock values, its because of crappy programing!!!! Heres a simple solution, bring back ALL XM programing, problem solved!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Kevin 414

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